A turbo increases gas mileage if you downsize the engine and then use the turbo to match the power. It's very hard to increase fuel economy by adding a turbo, unless you have "lossless throttling" (aka Valvetronic, VVEL, Valvematic, Multiair), where the boost the turbo builds will reduce compression work.
1200rpm is frighteningly low! How are you going to do that? I see that there are 3.250 final drives that will get you down to ~2000rpm or so, how are you going to get it to 1200? O_O
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